Read an Excerpt
Know Your Budget
Like the whooping crane and great-fitting jeans, budgeting is now extinct. The rise of credit and debit cards has made items that our foreshopping mothers had to wait months to purchase as accessible as whipping out our plastic friends—a major reason so many fashionistas like myself are in debt. Managing your money, including credit, is as big a part of being a budget fashionista as bargain shopping at the local discount store.
Somehow we’ve lost the art of shopping anticipation. Gone are the days of layaway, when stores allowed you to “hold” items for months, paying set amounts in cash until the purchase was paid in full. Even if you are a stellar budgeter, you’ve probably fallen prey to “buy-it-now-ism.” Take a moment and think about the last time you actually saved up for something. If you can remember that far back, remember the sense of pride and accomplishment when you saved enough to purchase the item. The immediate reward for saving was the satisfaction of knowing that the item you purchased was completely yours. The ultimate reward was better credit.
Looking fabulous and reducing debt are not mutually exclusive. In this step I’ll show you how to do both at the same time. All it takes is a little multitasking and some discipline. Even if you’re someone who looks forward to balancing your checkbook, you’ll learn innovative ways to track, save, and earn more dough, like the Saver’s Rule and hosting a clothing swap party.
In the first chapter you’ll learn how to develop your budget skills and ways to infuse much needed dollars into your monthly budget. By resurrecting the lost art of shopping anticipation, having a clear picture of your financial situation, and realizing that a pair of Manolo Blahnik strappy heels does not constitute an investment in your retirement fund, you will have not only a more secure future but also more money for shopping.
If you’re like me, you’re probably tempted to skip this step and head on over to “Step 2: Know Your Style” (page 39). Many of us dread creating a budget as much as we dread going to the gynecologist. I mean, who really wants to be on a budget? However, the thing you dread most (creating a budget) is exactly what is going to help you be fabulous for less. Read this section and find out how.
Raise your hand if you have ever experienced consumer cramps. This is not to be confused with the “other” cramps. Consumer cramps, a.k.a. buyer’s remorse, is the feeling you get in the pit of your stomach when you purchase an item that you know will wreak havoc on your finances. Consumer cramps come when you spend, say, $800 on a designer bag and realize that you now have barely enough money for the rent. In my case, buyer’s remorse is spurred on by the excitement of a sale. Like the time I purchased a beautiful black cardigan at Macy’s one-day sale, got home, and realized that I already had two similar beautiful black cardigans in my closet.
Budget Fashionista Tip #2: Keep the Receipts
Save all tags and receipts for at least two weeks after you purchase an item. Go to your local Office Max or Staples and purchase a coupon or bill folder. Number each tab in the folder according to the days of the month and place your receipts in the folder at least three days before the last day to exchange or return the item.
Learning how to spend and save wisely is the Advil for consumer cramps; you will enjoy a lifetime of relief. In this chapter you’ll learn how to create a budget that is both savings and shopping friendly. At its end you will feel empowered to make the financial changes necessary for becoming a budget fashionista!
Telling a fashionista not to spend money on designer clothes is like telling the sun not to rise. It’s just not going to happen. Fashionistas love to look great, and, unfortunately, that does cost some money. However, the most important element to looking great is style—something you can’t buy. No matter how many Manolos you have stuffed in your closet, you won’t look good if you can’t afford a pedicure to remove the crusty dead skin from your heels. Having a Louis Vuitton bag won’t increase your style quotient if you’re so broke that you can’t afford a studio apartment on skid row.
The Budget Fashionista Explains:
Why You Should Start a Budget
Budget fashionistas know how to manage their checkbook and their closets. They know that sometimes they might need a little extra help, such as when I sought the help of a financial adviser to help me manage my financial assets. She helped me realize that the $50 U.S. Savings Bond my grandpa gave me when I was twelve didn’t constitute an established savings plan.
Thank God for financial planners like Janine Moore. This financial diva, a founder and a principal in Peak Financial Group, LLC, understands the lure of a good sale and the constraints of debt. While attending Ohio State University, she rang up over $5,000 in credit card debt shopping at JC Penney. Developing a budget helped her rein in her expenses and get rid of debt. Janine offered these five reasons fashionistas should develop a budget:
Reason #5:Buying a house is impossible if your credit is jacked.
Reason #4:Dodging creditors’ calls is no fun.
Reason #3:Saving a little now beats saving a lot later.
Reason #2:Having plastic surgery done on your credit cards is less painful than having it done on your body.
Reason #1:Having more money to spend on yourself is feasible if you don’t have any debt!
During the summer of 2005 I conducted a somewhat scientific survey of the over fifteen thousand active recipients of The Budget Fashionista newsletters in an effort to find out what is “normal” in regard to shopping, budgets, and purchases. More than eight hundred fashionistas responded to the anonymous survey, and their true shopping confessions are placed throughout the book. What I found out was that when it comes to shopping, one size doesn’t fit all. Respondents’ shopping budgets ranged from a paltry $25 per month to an excessive $3,000 a month. What you spend per month on clothing is, and should be, a function of your job, your geographical location, and your personal finances. The Saver’s Rule can help you figure out how much you should be spending per month on shopping.
Budget Fashionista Tip #3: The Saver’s Rule
Here is a little-known fact: The more you save, the more and longer you will be able to spend. Budget fashionistas must save at least as much as they spend on clothes per month. For example, if you have $250 after paying all your expenses, at least $125 of it should go into your savings account. Deposit the other $125 into a completely separate
interest-bearing checking or savings account with its own debit card and checks, to be used specifically for shopping. That way you will be able to keep track of the money you spend on clothes.
Opening an interest-bearing savings account for your shopping funds is quite easy. If you have an existing relationship with a bank, ask one of the personal bankers if the bank has shopping savings accounts. These are special accounts that sometimes have slightly higher interest rates than a traditional account, allowing shoppers to save toward big purchases. If your bank doesn’t have them, just open a regular savings or checking account dedicated solely to your shopping purchases.
You have two basic choices to improve your budget: You can either increase your income or decrease your spending. I suggest doing both. In Chapter 2 I’ll show you ten ways to infuse cash into your bank account. I’ve used several of these methods to put dollars into my bank account. Dough-raising methods 3 and 4 (selling items to consignment stores and selling on eBay; see pages 23–27) were particularly effective in infusing much-needed cash into my budget. However, the easiest way to tilt the budget scale toward positive is to cut back on your expenditures.
The table below demonstrates how cutting back on simple items like trips to the local Starbucks and purchasing lunch every day can save you tons of money—enough to help fund a new wardrobe.
Building Your Own Budget
In any good relationship both partners must be committed to building and growing the relationship. In order to build a committed,
loving relationship with your finances, you must first investigate your own feeling toward money. Suze Orman, the financial guru, states in her book Financial Guidebook: Put the 9 Steps to Work, “Financial freedom begins not in a bank or even in a financial planner’s office, but in your mind. It begins with your thoughts.” Right on, Suze. So put your thinking caps on and ask yourself the following questions:
•Do I forget to balance my checkbook and rarely review my monthly statements?
•Do I spend more on clothes and accessories than I do on a savings plan?
•If I lost my job today, would I be unable to pay my essential bills?
•Do I consistently use credit cards to purchase basic items like groceries?
If you answered yes to any of these questions, then developing a budget is crucial to help you create a savings plan that is shopping friendly. Developing a relationship with an accountant can help you to manage your finances. You may also want to contact a certified financial planner (CFP). CFPs are financial professionals who have taken additional courses and passed a ten-hour examination on
advanced personal finance–related topics such as life insurance,
securities, and taxes. Although they charge a fee, CFPs can help fashionistas who need that extra push to make the budget cuts necessary to become a budget fashionista. To learn more about CFPs, visit the Certified Financial Planners Board of Standards, Inc. (www.cfp.net).
Steps to Building a Budget
1.Print out or ask your bank for your statements from the last three months. Gross salary is great, but you need to know exactly how much is put into your bank account after taxes (net earnings).
2.Gather all credit card bills from the past three months, organizing them in order of high to low interest rate.
3.When developing your budget, make sure to include all credit card purchases. Credit card money is real money.
Make creating your budget an event! Play your favorite CDs. If you love rock and roll, put on some Rolling Stones and roll right through your budget planning. If you like R&B, put on Destiny’s Child and get organized to pay your bills. Jazz lovers, let Coltrane help you speed your way through your financial planning. Once you have the music, make yourself a little cocktail. There’s nothing like a cocktail to help you get through any financial-based depression.
Tracking your budget is much easier if you use a spreadsheet program like Microsoft Excel or a personal financial program like Quicken or QuickBooks. You can purchase a version of the software at any Best Buy or Circuit City store, or you can buy online at eBay.com and save a few bucks (make sure it is a legal copy). Either way, these programs make it easier to manage all your accounts in one place. This is important because it allows you to see what kind of a dent you are making, if any, in your debt. Also, it allows you to link your budget to your bank account.
The Budget Fashionista Explains: How
to Save When You Really Want to Spend
One of the hardest lessons for a fashionista transitioning into a budget fashionista to learn is how to save when you really want to spend. After a few years of marriage, my husband and I decided to build a little equity by purchasing our first house, which meant we were operating on a strict budget, something that wasn’t exactly my strong suit at the time. What should have been a pretty easy task turned into a battle of epic proportions: Equity vs. Armani. Tax breaks vs. Lenox plates. A 20 percent down payment vs. 20 percent off at Bloomingdale’s.
Whether you’re saving for a house, a new car, or a much-needed vacation, the tips below will help you curb your spending and increase your savings:
1.Place an address label over debit and credit cards with statements to remind you of your goal. Try statements like “What would Suze Orman do?” “Equity is love,” “Closet vs. house,” or my personal favorite, “You ain’t Oprah.” Every time you reach into your wallet to use the card, your saying will remind you not to spend.
2.Launder your money. At the beginning of each week take out all your spending money—I mean everything in cash (including grocery money)—and hide your wallet in your dirty clothes hamper. When it’s time to you do your weekly laundry, it’s time to take out more spending money.
3.Window-shop from a distance. Drive to a mall that is very far from your home to go shopping and bring only $10 in cash with you.
4.Shop with an annoyingly cheap friend. This is a particularly effective approach if the person is the type of cheapie who makes comments like “That costs only $2 to make” and sighs every time you select something from the racks.
5.Freeze your credit card. This old savings trick really does work, but make sure you won’t need the credit card anytime soon. I once had a very nasty incident thawing out the credit card in the microwave. Let’s just say that credit cards aren’t made of microwavable plastic.
Another way to save money is by saving your spare change. When I was a child, my father would often give me change from his pocket. I used to put this extra money into my Mickey Mouse bank. Although the Mickey Mouse bank is long gone, I continue to put pocket change in a little bank. Yes, I know it sounds corny, but your spare change could fund a pair of new shoes or help lead to an early retirement. At the end of each month lug your growing stash to the bank and deposit it in your shopping savings account to use at your whim. Whatever you don’t use earns additional interest until you do use it.